Thursday 24th

Well that was some monster rally off the lows. The lows yesterday were significant as they prove that we must test and did test the lows of Tuesday premarket FED rate cut. So what happened today? Well let me first start by saying that the ten largest gains in the DOW and S&P happened in bear markets, why this is so I will explain. In bear markets just as bull markets we often get exaggerated in one direction, bear market to the downside and bull markets to the upside. Since January we have been down and as of now we are on record to post the worst January in market history but I digress. The first two weeks of January I have been getting a lot of oversold conditions on the market such as extreme TRIN readings. These extreme TRIN$ readings for days cause what is referred to as ‘Elastic band theory’, which is where we are so stretched to the downside that when the selling pressure eases up we catapult in the opposite direction. Today was a classic example of that theory.
Now what next for the market? Today I anticipate the Bulls to show up and consolidate the move made yesterday. What I would love to see is a gap down and a push higher into some resistance at 1355 on the S&P. Whether this happen is just a guess but just like yesterday’s blog entry of a devious scenario which did play out I might as well guess for this scenario to happen today. After we hit resistance I do expect us to consolidate the move.
For today my plan is this- I will be looking at the strong sectors and stocks to have some follow through. On a gap down I would 100% be a buyer of stocks such as BSC, FDX, GS, FSLR and even GOOGLE. One sector I have been making note of in the past few sessions is the housing and retail sector. Yes these two sectors have been so beaten down that funds seem to be bottom picking at a few of them, noticeable LOW, HD, CTX, TOL etc. I suspect these two sectors should see alittle more upside if the market pushes higher here.
Today I would take small and see how we digest the move, but I would be looking on the above stocks on any set up and also looking for resistance into that S&P area noted above.

Good Luck.